Food Supply Networks: Trust and E-Business

When relations are facilitated by communication technologies such as e-business, food supply networks can improve efficiency, flexibility and effectiveness. However, a lack of trust within such transactions can prevent the integration of e-business into this large, economic sector. Using case studies from European countries, chapters discuss trust-building methods for food networks in an e-business environment. Key issues include the influence of cultural disparity and cross-border transactions upon major product groups such as meat, cereal products and fresh produce.

This chapter investigates what role trust plays for a company in the food business that is in need of a new supplier. It lays the foundation for the

­remainder of this book, in which electronic trust-related communication is the focus.

The concept of trust can have many meanings, ranging from total, heartfelt reliance on one another, through trusting only some aspects – for instance, the good intentions, but not the competence – of a partner, to trusting that one can punish defaulting trade partners.

Trust is needed in business relationships to mitigate transaction-related risks. This is important in a sector where quality problems can have severe consequences for consumers. The greater the perceived risks, the more energy a company will invest in making sure that new partners are trustworthy.

By identifying the most relevant agri-food trade streams we show trading volumes in selected countries and establish a foundation for later research in the e-Trust project, with particular consideration of the specific role of trust in these transactions and how it can then be transferred to e-commerce.

For the elaboration of the collected data, mainly the international statistical database of the United Nations Food and Agriculture Organization

(FAOSTAT) is used as a common basis for comparison. This procedure is applied to six European traders in agricultural products (Germany, Austria,

Italy, Slovenia, Greece and Spain) and three non-European countries (the

USA, Brazil and Turkey). In line with the statistical sources mentioned above, primary commodities are grouped into four categories: cereals, meat, fruit and vegetables, and olive oil.

In the previous chapter, the trans-European cross-border exchange of food and the flow of international food chains at specific chain levels were identified. This chapter builds on these data, and analyses these food chains and the transaction processes by identifying and assessing the perceived risks typically associated with these cross-border transactions, also assessing operators within the different food supply chains. The same markets were analysed (Germany, Austria, Italy, Spain, Slovenia, Greece, Turkey, the USA and

Brazil), maintaining the same four commodity food groups (cereals, meat, fruit and vegetables, and olive oil), for risks perceived by operators in a first-time transaction with a new supplier.

In this chapter we assess the importance of trust-building features in food supply networks where business-to-business (B2B) applications are used to promote transactions. Results from this evaluation show that product-related attributes are the most important ones, and the use of product-related trust features fosters trustworthiness. But the findings also highlight that different cultures (and – to a limited extent – different food sectors) require the use of different trust features. The personal aspect seems to be the dominant force in relationship-­oriented cultures; hard facts like product attributes are more important in task-oriented cultures.

4.1

Introduction

Mutual trust is a prerequisite for doing business over the long term. The seller has to be able to rely on the buyer’s willingness to pay, just as the buyer has to be sure that the products he/she is going to receive are of the required quantity and quality. If companies are satisfied with the performance of their business partners, the chances of a long-term relationship continuing will increase; otherwise, they will decline. Traditionally, commercial dealings have been shaped by the personal relationships between the people representing the companies involved; however, today many business relationships are established and sustained virtually through the use of B2B e-commerce. In view of this, a key question is ‘how can trust be generated if business partners

This chapter describes the importance of e-commerce and information and communications technology (ICT) in the Spanish food market. The situation in Spain may give some clues to other countries with similar conditions for adapting their actions in the adoption of ICT processes.

Some possibilities for e-markets with the applications of ICT are described, and barriers and motives. Some general information on the situation of Spain may help to understand the reasons why Spain is behind other developed countries in this area. We focus attention on a specific area: the role of trust in commercial transactions, including basic concepts, typology and practical perspectives. The challenge is to look for some other elements, besides traditional socio-economic ones. Some experts consider that transparency and trust are key elements for the take-off of ICT and adoption of e-commerce.

E-marketplaces and their role in food networks provide an interesting perspective on food trade flows. Developments in information and communications technology (ICT) have led to the introduction and setting up of e-marketplaces to enhance and improve business-to-business (B2B) relationships with the aim of reducing transaction costs, eliminating errors, defining a common basis on which to work and speeding up business operations. Also, in this framework trust assumes a very important role because it replaces traditional interaction between business partners. In the food sector the trust issue plays a fundamental role because of the characteristics of food products. In this chapter, a framework for trust in e-environments is provided. First, the evolution and role of e-marketplaces in the food sector are discussed, along with considerations regarding the main barriers that might hinder the adoption of e-commerce tools for trade exchanges. Then evidence from analysing existing e-marketplaces and from interviews with Italian business operators is presented. To conclude, an outline is provided of the important trust elements detected in existing e-marketplaces in the food sector.

The Netherlands; 4Delft University of Technology, Delft, The Netherlands;

5

University of Macedonia, Thessaloniki, Greece; 6Technical University of Madrid, Madrid, Spain

1

Executive Summary

The adoption of e-business in the agri-food sector is not common. One of the main reasons for this is the difficulty of communicating trust. Trust helps with cross-border trade and profiting from e-business, especially in the agri-food sector, which involves products with uncertainties and risks regarding quality and safety. The objective of this chapter is to give an overview of how – and through which electronic information and communication functionalities – trust is currently generated and supported in e-business applications in the agri-food sector. The aim will be achieved through analysis of e-marketplaces regarding their functionalities for trust creation and confidence communication. The collected state-of-the-art in electronic trust generation in the food sector is integrated with the culturally sensitive typology of trust elements in business relations (especially in first transactions with a new business partner) presented in Chapter 1.

Trust in traditional business situations is usually established by various means, for example through face-to-face meetings or reliability of business partners. But in e‑business, especially when seeking new customers and aiming to start sustainable relationships, trust has to be generated in other ways.

In this chapter, 22 features related to trust are tested, from productrelated attributes such as quality management (QM) certificates and companyrelated attributes like complaint management systems to market-related attributes such as information about legal issues. In the first part of this study, experts from the food sector evaluated these 22 trust features. They had to assess how much these trust features would improve the chances of a prospective client initiating a first contact with the seller. Or how much the features would help to buy a product from the company in question. In the second part, the interviewees were asked to select directly those trust features that they found most likely to indicate trustworthiness from a list of graphical prototypes.

Trust is a multifaceted concept describing a generalized expectancy towards the behaviour of others; it reduces the complexity of a social decision situation on the basis of former experiences. Evidently, trust is complex, defined differently by different parameters in various disciplines. Economists, sociologists, psychologists, political scientists and marketing managers consider widely different features of trust in reviews pertaining to the subject (Mayer et al., 1995; Misztal, 1996; Nooteboom, 2002; Nannestad, 2008), indicating that trust is not the same thing to everyone because its significance is a function of a specific context. Even within the same discipline, the concept of trust can vary because it can be rooted within a cultural tradition and affected by cultural differences (Knight, 2007). In this light, a typology of trust was presented in the specific construct of the agri-food sector and the definition from Mayer et al. (1995) was adopted (Chapter 1, this volume) because much of the empirical literature on trust refers to his work (see McKnight and

challenge to the establishment of new B2B relations that could provide many competitive advantages such as more competitive price offers, more resilient food supply chains, shorter distances, agri-product differentiation, reduced commodity backlogs and bottlenecks, and a more complete food offer to new suppliers from the other hemisphere (Leroux et al., 2001; Trienekens et al., 2012).

To derive these benefits, but also to create successful e-commerce trading reliant on procurement of new suppliers, early barriers in establishing new

B2B partnerships need to be mitigated. Chapter 4 explored, using qualitative techniques, the use of appropriate trust-building features in a food supply network that could be implemented to generate trust in buyers considering transactions with new suppliers in a B2B e-commerce context. Vital to a successful transaction process, from start to finish, is effective communication and a central trust-forming element (Selnes, 1998; Hanf and Dautzenberg,

probability of transaction. Independent proof of the quality of the product with comprehensive description and specification of the product are also considered very effective trust signals (Chapter 8, this volume). Interesting to note is the shift towards a greater emphasis on product features for e-commerce in websites, whereas in EMPs proportionally greater importance of seller attributes is observed. Furthermore, some elements may be important at different stages of the transaction process. Contact details are vital, but this trust feature alone will not secure a B2B sale. Rather it functions in the initial stage of transactions, enabling a supplier to ‘get a foot in the door’.

Tracking systems and explicit warranties are also effective in trust-signalling because the risk associated with delivery and unsatisfactory purchases is reduced (Chapter 8, this volume).

As expected, the efficacy of trust-building features can also vary according to commodity market and culture, because the perception of trust is contextand culture-sensitive. Each commodity market is exposed to different threats in transactions, and most effective trust-building features in each commodity may be slightly modified in response to these risks. For example, legal and contact information is weighted more important than average in the cereal sector, whereas Quality Management Systems (QMS) certificates and complaints management were rated less important than average. In contrast, these latter features were ranked especially important as trust signals in the meat industry. Ultimately, hard facts, like certificates, specifications and warranties, are more effective than soft facts, like product images. A ranking of trust features of different levels of importance has been provided, in which category A-features, such as QMS certificates, should not be omitted, B-features could help improve trustworthiness and C-­features do not improve perceptions of trust for the user. No feature directly reduces the perception of trust, but the use of all features is not advisable because it could result in an ‘information overload’ and may actually create distrust through the excessive use of these indicators. Indeed it is the discerning use and correct combination of the relevant trust signals that confers trust and credibility (Kirmani and Rao,